Hockey warns of tough 2014 budget

Updated
March 31, 2014 08:46:00

In seven weeks the Government will had down its first budget and it's promising to be tough. Treasury figures show that without significant structural changes to the budget, government spending will outpace tax receipts every year for the next decade, which would leave the budget in deficit for at least 16 years.

CHRIS ULHMANN: First, in seven weeks the Coalition will had down its first budget and it's promising to be tough.

Treasury figures have been splashed across the pages of today's papers, showing that without significant structural changes to the budget, government spending will outpace tax receipts every year for the next decade.

that would leave the budget in deficit for at least 16 years.

Now, there are only two ways to bridge a budget deficit: raise more tax or cut spending.

So this is all part of a process of getting the community ready for pain.

Joe Hockey is the man in the hot seat. Treasurer, good morning.

JOE HOCKEY: Good morning Chris.

CHRIS ULHMANN: Can you lay out the future for us in these Treasury documents, what happens without changes to Government spending.

JOE HOCKEY: Well without changes to government spending, the budget is in deficit for at least a decade. It would be the longest period of continuing deficit in modern history.

And, the fact is that Labor locked-in beyond what was published for four years. Labor locked in the highest expenditure on record, certainly since World War 2.

Now, the fact is we have to make the decisions to reduce government expenditure and we find ways to try and increase revenue as well.

CHRIS ULHMANN: Those increases were all known knowns before the election on disability insurance and on school funding, so why did you sign up for them?

JOE HOCKEY: Well, we didn't anticipate that everything else would be of equal or larger scale as a tsunami coming across the water.

The fact is, Labor's left us with a massive forecast increase in foreign aid, a massive increase in defence. For example in one year, there is meant to be a real increase in defence spending by 13 per cent, a 66 per cent increase in foreign aid.

CHRIS ULHMANN: You signed up for the defence spending as well though didn't you? And in fact promising to increase it even further?

JOE HOCKEY: Well, this is the bottom line, we didn't know what those fifth year numbers were in opposition, and of course, in relation to the National Disability Insurance Scheme, there's been a report out recently; an independent report, which likened the to the National Disability Insurance Scheme to a plane that had taken off that is still being built in the air, which indicates that potentially, if we don't get on top of the proper management of the National Disability Insurance Scheme, not only would it not be sustainable, but it could end up as big a farce as the pink batts program or the $900 cheque program.

CHRIS ULHMANN: But again, you may not have known the scale of all these things, but certainly you were concerned about all these things before the election you were saying that Labor had been spending like a drunken sailor, you'd have to fix the budget, there was a budget emergency, so why on top of all that did you add another $5.5 billion a year in a paid parental leave scheme?

JOE HOCKEY: Well the paid parental leave scheme is not only fully funded, because we are imposing a levy on big business, but it is a very significant driver of productivity growth. It will certainly help with participation increases and it is a great advantage for small and medium-sized enterprises who at the moment, cannot afford to provide paid parental leave at a level equivalent to big business and therefore have significant challenges in recruiting staff to compete with big business, but also, it is a driver of participation, particularly for women, which we need, which every country with an aging population needs and that is, we've got to increase workforce participation by women.

CHRIS ULHMANN: So all of this adds up to you saying the budget cuts that are coming have to be hard and they have to be deep.

JOE HOCKEY: Well, they've got to be fair too and that's the bottom line; it is about making sure that everyone, everyone in the community helps to do the heavy lifting on repairing the budget.

Because it's not just about, this is not an ideological drive Chris, this is about whether we want to simply sustain our quality of living, not even improve our quality of living. It is about whether we can sustain our current quality of life with an ageing population and with significant offshore competition for our markets, how do we do it? Well, we've got to make sure that we live within our means.

CHRIS ULHMANN: Well looking at that and the ageing population, 80 per cent of people over 65 with more than a million dollars in assets are still getting a part pension, is that sustainable?

JOE HOCKEY: Well, that's something obviously that needs to be taken into account. The aged pension is growing at a massive rate and part of that is obviously linked to the increased in the aged pension by something higher than the inflation rate, it's male average weekly earnings and that means it keeps growing faster than a lot of other payments.

But also, it's about our ageing population and the fact is that we are living longer, and we should celebrate that, but the question is, how do we sustain these sorts of payments and ensure that they are sustainable in 10, 20 and 30 years time, not just about tomorrow.

CHRIS ULHMANN: So would you be pushing up the age at which people should get the pension, would you be cutting the number of people who are getting the pension now?

JOE HOCKEY: Well look Chris, I'm not going to speculate on the budget. I mean everyone's looking for answers, the first thing is, and we've got to identify the significant sort of problems.

CHRIS ULHMANN: Sure, I'm just looking here at how we look at some of these things though, given what you're saying and the absolute emergency of it, shouldn't you means test every government entitlement?

JOE HOCKEY: Well, I'm not going to speculate on where the budget lands at. We are working through all of those issues; we are endeavouring to be as fair and as reasonable as possible, but we have a mandate and there is an expectation in the community that we are going to fix the structural problems of the budget and the economy and we are getting on with the job.

CHRIS ULHMANN: Should you scrap the rebate for private health insurance?

JOE HOCKEY: I'm not, I promise you Chris, I'm not going to respond; we can go through every line item in the budget but you won't get an answer because we're not going to be announcing or revising policy on the run.

CHRIS ULHMANN: Sure, but aren't these conversations that the community needs to have because, as you say some areas of spending are unsustainable and those areas need to be identified and they shouldn't come as a shock to people.

JOE HOCKEY: Well, I think that's right and over the next few weeks as we are able to firm up what the budget looks like, we'll be able to engage in that public discussion. But the fundamental point is, we want to ensure that was is sustainable is delivered in the budget. That's our key focus Chris. It is essential that the budget deals with the structural issues not just the short-term issues.

CHRIS ULHMANN: And you're heading off to Perth this morning, is the Government losing ground there as we head into the weekend's Senate election?

JOE HOCKEY: Oh, not at all. I think the people of Western Australia know that the only way to get rid of the carbon tax, the only way to get rid of the mining tax is to vote for the Liberal party. It's so obvious now that Labor's now voted against the removal of both taxes in the last two weeks of Parliament.